Investment banks with growing capital requirements and large debt and infrastructure teams are looking to launch infrastructure funds using capital from pension funds and asset managers, with Barclays set to lead the charge in the UK.

Building infrastructure

Incoming Basel III banking capital requirements are set to penalise banks for making long-dated loans needed by infrastructure projects. European-based projects secured just $68.3bn of financing during 2012, down 24.6% compared with 2011, according to data from Thomson Reuters.

But, according to four individual sources familiar with the situation, investment banks have been offering their banking expertise to pension funds, not only to source new deals, but also remain active in the trillion-dollar infrastructure market.

One European asset manager who has been approached by the banks, said: “Banks have been offering and managing infrastructure assets for a number of years. The problem is they have hired teams in their hundreds.

“These guys are no longer writing any business. So their plan is to use their expertise, without sacking the whole team. They are now speaking to pension funds and trustees and saying: ‘We can’t write new business, but we have all the skills required. Why don’t we do that on your behalf?’.”

Late last year, French bank Natixis set out plans to partner with institutional investors and co-lend to infrastructure projects.

Barclays, a billion-pound player in the UK infrastructure market, is now looking to raise capital alongside pension funds and long-term investors, according to a person close to the situation. This new strategy, with a potential launch date this year, will invest solely in new deals. It is understood Barclays will pocket a fee for originating the deals.

Last year, Barclays attempted to raise a £500m fund seeded with existing public-private partnership assets from its own balance sheet, alongside third-party assets. If the plan had come to fruition, Barclays would have earned both an origination and a management fee.

A source familiar with the situation said: “We had a cornerstone investor that got cold feet, once they left, we couldn’t get traction.”

The project was subsequently abandoned.

--This article first appeared in the print edition of Financial News dated 18-02-2013